Free pricing beckons, insurance firms get nosy

How much fuel does your car consume? Do you maintain your car well? How many times has your driver been fined for jumping signals and cutting lanes?

Of course, you know all the answers to these questions. Actually so do general insurance companies, which plan to use this information for putting a price tag on motor insurance products from January 2007.

In the run-up to the detariff regime, insurance companies are aggressively collecting information from petrol pumps, garages, company websites, car manufacturers, retail dealers, banks, travel agents and even traffic police and road transport officials to price motor insurance premiums.

The data collected by insurers are based on various parameters such as the type of petrol used, amount of petrol your car consumed, the area travelled, the car and service station of your choice and annual maintenance expenditure of your car and the number of cars you own. These factors will have a direct impact on the rating of a car.

"Though we have been collecting data for the last five years, we are concentrating on building more specialised data to help in pricing in a tariff-free regime," said Ajit Narain, MD and CEO of Iffco-Tokio General Insurance Company.

Going by the findings, red cars are a favourite with teenagers, who tend to be reckless drivers. Claim data of insurers also reveal that due to higher thefts and a larger number of accidents, car owners in north India will have to pay a high premium compared with car owners in southern India.

"We have been collecting data on the make and model of the car, age of the car, the claim experience of the driver/owner, value of the vehicle and so on. Each model has its claim cost," said K Krishnamoorthy, head of underwriting at Bajaj Allianz.

ICICI Lombard has collected information on parameters such as the cubic capacity of the car, age and accident history of the driver, the damage in each accident, the locations the car has travelled to, the make and model of the car, claim experience with the driver and the average claim paid.

Mercedes Benz has emerged as the most profitable model to underwrite for every insurance company. Why? Because it is a family car that is used sparingly for shorter distances and is always locked and kept in a garage.